On Nov. 9, Senator Elizabeth Warren paid a visit to the headquarters of the Consumer Financial Protection Bureau in Washington, the agency she helped create before she got to Congress.
The Massachusetts Democrat’s meeting with CFPB staffers had been scheduled before the election. Taking in the surprise result, Warren offered a sobering description of the uncertainties that lay ahead for the young agency with Republicans in control of both the White House and Congress, according to people familiar with her remarks. She told the staffers she would fight against any attempts to change the agency’s structure or funding, or any of the rules the regulator was working on.
Warren is digging in because of what the CFPB’s work means to her. The agency is part of the Dodd-Frank Act, which was passed to rein in the financial-services industry after the crisis of 2008. Its charge is to combat “unfair, deceptive, or abusive acts and practices” at banks and credit unions with more than $10 billion in assets. The CFPB is also a watchdog for mortgage servicers, payday lenders, and debt collectors.
And it’s been very active. The agency levied a $100 million fine against Wells Fargo after disclosures that employees had opened unauthorized accounts for customers in an effort to meet sales goals. It has compelled lenders to verify that borrowers can afford to repay loans and has mandated improved disclosure in mortgage, credit card, and student loan forms and on monthly statements. In all, the CFPB has provided almost $12 billion in relief to about 27 million consumers since it opened its doors in 2011. It has won praise from consumer-rights activists.
“A lot of the people who voted for Trump are people who got the short end of the economic stick,” says Ira Rheingold, executive director of the National Association of Consumer Advocates. “And the fact is, the CFPB is an important protector of those people.”
It’s been a “hot place to work,” says Adam Levitin, a professor at the Georgetown University Law Center.
It sure has. From the start, the agency has been a lightning rod for Republicans and many in the financial-services industry who say certain rules restrict consumers’ access to credit and financial products they want. They complain that the director, Richard Cordray, has too much power. Some of the language in the statute that created the bureau “is so broad and vague that it has let them go after anything they don’t like, even if there’s no evidence of any consumer harm or injury,” says Alan Kaplinsky of the law firm Ballard Spahr, who fought the CFPB’s work to change arbitration clauses that prevent consumers from suing. Democrats respond that the CFPB must report extensively to Congress.
The agency isn't the only Obama-era consumer protection measure that could be in jeopardy. Another is the Department of Labor’s fiduciary rule, yet to take effect, which calls for brokers and financial advisers to put clients’ interests ahead of their own when handling retirement investments. The rule is expected to accelerate the shift of client money into low-cost index funds and away from actively managed funds, especially those with sustained subpar performance and high fees. Only about 15 percent of actively managed large-cap domestic stock funds beat the S&P 500 Index in the 10 years ended June 30, according to Dow Jones Indices.
Although President-Elect Donald Trump has said nothing about the rule, his fundraiser and adviser Anthony Scaramucci, founder of SkyBridge Capital, has argued that it would drive small investment advisers out of business, force people into index funds when active funds might better meet their needs, and ultimately cost investors money.
“Let the free market dictate where assets flow,” Scaramucci wrote in a Nov. 1 op-ed piece in the Wall Street Journal.